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What determines taxable gain or loss in property sales?

Difference between sales price and original basis

Difference between net sale price and adjusted basis

The determination of taxable gain or loss in property sales hinges on the comparison between the sale price and the adjusted basis of the property. The adjusted basis reflects the original cost of the property, plus any improvements made, minus any depreciation taken. Thus, when the net sale price—meaning the amount received from the sale after subtracting selling expenses—is compared to this adjusted basis, it reveals whether there is a gain or loss for tax purposes.

If the net sale price exceeds the adjusted basis, a taxable gain occurs; if it is lower, a loss is recognized. Recognizing this structure is essential for accurately assessing tax liabilities from property transactions.

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Cost of improvement minus original basis

Market value appraisal minus purchase price

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